Natural gas-fired generation set to grow rapidly in U.S. fueled by low gas prices

Energize Weekly, February 8, 2017

The utility industry is set in the next two years to add 36.6 gigawatts of natural gas-fired generation—the most in more than a decade, according to data from the federal Energy Information Administration (EIA).

If all the proposed projects come online, it would increase natural gas generating capacity 8 percent over the capacity at the end of 2016. “Depending on the timing and utilization of these plants, the new additions could help natural gas maintain its status as the primary energy source for power generation, even if natural gas prices rise moderately,” the EIA said.

Two trends have fueled the growth in natural gas generation: the steady retirement of older coal-fired units and low natural gas prices.

Coal-fired capacity fell by an estimated 47.2 gigawatts between the end of 2011 and the end of 2016, equivalent to a 15 percent reduction in the coal fleet over the five-year period, and the trend is set to continue. There are 46 coal-fired units of more than 100 megawatts (MW) each—a total of 15.6 gigawatts—that have received regulatory approval to retire over the next 12 years, according to the energy research and analysis firm, SNL Energy.

Meanwhile, the cost of natural gas delivered to power generators fell from an average price of $5 per million British thermal units (BTU) in 2014 to $3.23 in 2015 and averaged $2.78 per million BTU from January through October 2016, the EIA said.

The EIA said that increased natural gas production from U.S. shale deposits was a prime reason why natural gas prices have been low. It noted that many of the natural gas power plants being built are in the Mid-Atlantic region, home to the Marcellus Shale, and in Texas, where the Eagle Ford Shale is located. Expanding natural gas pipeline networks also help support the growth in natural gas-fired electric generating capacity.

 Among the new gas-fired generation projects are:

  • A$480 million, 450-MW combined-cycle power plant set to be built in Birdsboro, Pa.
  • The $1.5 billion, 1,000-MW Cricket Valley Energy Center in Dover, N.Y. The combined-cycle plant will be located adjacent to the Iroquois Gas Transmission System pipeline.
  • The 829-MW Liberty Power Project, Bradford County, Pa., developed by Panda Power Funds. It is one of three Panda natural gas generation projects in Pennsylvania. Panda does not disclose cost figures, but an estimated price tag for Liberty is $830 million.
  • A 993-MW, $ 1 billion natural gas plant in Montgomery County, Texas, proposed by Entergy Texas.
  • A 980-MW combined-cycle plant to be built by Entergy Louisiana in Charles Parish, La. Development costs are expected to run $869 million including transmission and other associated costs, with a service date of June 2019.

The EIA projects that natural gas prices will rise in 2017 and 2018, and that may lead to some plants not being built in the two-year time frame. Rising natural gas prices may also encourage fuel-switching. The agency says this would give coal consumption a slight boost so that by 2018, natural gas will provide 33 percent of U.S. electricity generation and coal-fired plants 32 percent, compared with 34 percent for natural gas and 30 percent for coal in 2016.

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